House Price Crash Discussion Thread

wolvoman

!!!!!!? wrote: »

People get hurt in any recession. However, the coming one will be especially bad because so many past recessions have been deferred.

By my reckoning we should have had a recession in 2001, one in 2003 after that didn't happen and a bigger one in 2005 .. all avoided by ever looser monetary policy and each one potentially bigger because it was deferred by the government making money cheap to borrow.

2000/01 I agree with you. The US went into recession and for many in this country who worked in IT, travel, finance, telecoms, media and several other industries it was a horrible time. In fact it wouldn't be wrong to say that the private sector DID have a recession in 2001 in the UK, but the official figures were kept bouyant by huge public spending (using credit of course!) and this in turn kept house prices on a small but steady rise in that time.

2003 was a minor loss of growth rather than anything else - the aftermath of 9/11 and the Iraq war hurt some sentiment but interest rates were lowered (right down to 3.5% at one point) without any effect on inflation so this was not a potential recession.

2005, no chance. The global economy was powering ahead, financial services were booming, construction was booming. Of course the mistake of that IR cut in mid-2005 is still hurting us now but 2005 by itself was not a downturn year.

wolvoman

!!!!!!? wrote: »

If the US slips into recession despite savage interest rate cuts and a massive government tax giveaway it's going to be a huge and long lasting one as they have nothing left to deploy to fight it off and they look set to be hit with a huge dose of inflation courtesy of the suicidally low interest rates they've been running.

Just spotted what you wrote here.
If a recession were to be huge and long lasting then how would low interest rates stoke up inflation? The currency will devalue as much because of the economic weakness as the interest rate cuts.

It seems to be a hard argument to defend on this thread but surely some growth with an upturn of inflation is better than stagflation?

WTF?_2

wolvoman wrote: »

Just spotted what you wrote here.
If a recession were to be huge and long lasting then how would low interest rates stoke up inflation? The currency will devalue as much because of the economic weakness as the interest rate cuts.

It seems to be a hard argument to defend on this thread but surely some growth with an upturn of inflation is better than stagflation?

Lower interest rates mean your currency devalues.

As that happens, all your imported stuff becomes more expensive, pushing up prices.

Once you start getting serious inflation, it makes things very difficult indeed for the economy. Businesses can't make proper plans as they don't know what things (goods and services) are going to cost x months down the line, or what their workers are going to expect to be paid. You also have increased likelihood of industrial disputes as people start going on strike for more pay. As money gets more and more worthless, confidence in the economy collapses amongst business and public alike as well as foreign investors. People see their life savings disappear.

It's just a disaster which is why in the end interest rates will be hiked high to combat it. Just like last time around. The idea is to nip it in the bud with small rises well ahead of time, not allow it to get a grip by keeping rates too low for too long which is manifestly what has happened/is happening.

merlinthehappypig

Invesco predict an average 10% fall in house prices this year.

http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=429799&in_page_id=57

wolvoman

merlinthehappypig wrote: »

Invesco predict an average 10% fall in house prices this year.

http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=429799&in_page_id=57

So the pessimists predict -10% and the optimists predict 0%. I guess it'll probably be somewhere in the middle.

VFR-Rider

I'm following this thread with huge interest, mainly because it's of great relevance to me.
FWIW,
I'm a FTB... however I have a reasonable deposit, and a mortgage promise (that's good till summer on my current conditions, I expect my salary to increase before then) that's more than high enough for the type of property I wish to buy (in the areas i'm interested in).

Now here's the odd bit.. I want a property... I have the finances in place and yet right now I'm not even viewing (although I am regularly checking findaproperty/ rightmove). So why am I not willing to buy yet? I'm waiting for prices to fall of course! Now how many others are there like me that impacting the demand?

This is why I expect to see a dip at which point a lot of people in a similar situation to me will rush in & buy. Once these people have bought the surge will be over & prices will fall...

The real question of course is when do you actually buy... well for me the answer is simply when I feel like it, I'll be buying a place big enough for a while so have no real interest in the short term (for me that's < 5 years), after that period the only possibilities are:
Property gone up =
Property stayed the same (relative) = (rent free living!)
Property dipped = win some lose some (I won't be massively stretching myself)
Property crashed = well I bought the place with room to grow... what's the rush?

boinging_2

VFR-Rider wrote: »

I'm following this thread with huge interest, mainly because it's of great relevance to me.
FWIW,
I'm a FTB... however I have a reasonable deposit, and a mortgage promise (that's good till summer on my current conditions, I expect my salary to increase before then) that's more than high enough for the type of property I wish to buy (in the areas i'm interested in).

Now here's the odd bit.. I want a property... I have the finances in place and yet right now I'm not even viewing (although I am regularly checking findaproperty/ rightmove). So why am I not willing to buy yet? I'm waiting for prices to fall of course! Now how many others are there like me that impacting the demand?

This is why I expect to see a dip at which point a lot of people in a similar situation to me will rush in & buy. Once these people have bought the surge will be over & prices will fall...

The real question of course is when do you actually buy... well for me the answer is simply when I feel like it, I'll be buying a place big enough for a while so have no real interest in the short term (for me that's < 5 years), after that period the only possibilities are:
Property gone up =
Property stayed the same (relative) = (rent free living!)
Property dipped = win some lose some (I won't be massively stretching myself)
Property crashed = well I bought the place with room to grow... what's the rush?

You sum it up very well. A lot of people on here think that all people wanting prices to drop cannot afford houses at the moment (which may be true in some cases), however there are a lot of people like you (and I) who could go and buy a house tomorrow but are choosing to wait.

This is generally because I will be a) getting more house for my money and b) protecting myself against the current monthly negative growth figures.

tr3mor

VFR-Rider wrote: »

Property stayed the same (relative) = (rent free living!)

What about interest payments? They aren't free and don't knock any money off the loan.

If they're more than your rent would've been then you're out of pocket.

VFR-Rider

tr3mor wrote: »

What about interest payments? They aren't free and don't knock any money off the loan.

If they're more than your rent would've been then you're out of pocket.

Me wrote:

Property stayed the same (relative) = (rent free living!)

Sorry I should've been more specific, I of course mean lower rent as in my case the rent I pay now is many times that that I would pay on the interest portion of a mortgage assuming (there's that word again!) that interest rates don't head for double figures in the near future!

John_Pierpoint

What about the money that your meaty deposit is currently earning in interest?
I suppose that is taxed and I am one of the few people left who can remember the days of owner occupiers being taxed on the saving in rent they were making.
Your marginal tax rate comes into the equation.